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Crisis in Ukraine

The European Union is far from easing sanctions on Russia because of the persistent tensions in eastern Ukraine, German Chancellor Angela Merkel warned Monday, as officials said clashes left at least 12 dead in some of the worst violence since a cease-fire signed earlier this month.

A daily roundup of corruption news from across the Web. We also provide a daily roundup of important risk & compliance stories via our daily newsletter, The Morning Risk Report, which readers can sign up for here. Follow us on Twitter at @WSJRisk.

Bribery:

Anti-corruption activists are furious about the U.K. government rewriting the Bribery Act. (The Independent)

The U..K government will provide financial support to SBM Offshore, at a time when the company is under investigation for bribery in Brazil. It paid $240 million to settle allegations in the U.S. and the Netherlands. (Guardian)

The Hong Kong Monetary Authority fined the local unit of India’s largest bank about $1 million for failing to carry out proper checks to prevent money laundering and terrorism financing. (Bloomberg, Reuters)

As Native American tribes begin selling marijuana on reservations, banking regulators just rejected a financial institution that aims to be the first to serve the industry in Colorado. (McClatchy, NY Times)

What’s at stake for family-owned businesses under the European beneficial ownership rules? (Financial Transparency)

General Anti-Corruption:

White-collar crime prosecutions in the U.S. are at a 20-year low, according to data analyzed by Syracuse University’s Transactional Records Access Clearinghouse.

Siemens is substantiating more internal reports of corruption but punishing fewer people. (100Reporters)

China’s former vice minister of environmental protection was placed under investigation for “severe disciplinary and law violation,” the Communist Party’s anti-corruption agency said, using a common euphemism for corruption. (Reuters, South China Morning Post)

Ukraine Creditors Agree Small Haircut to Speed Debt Restructuring

A group of Ukraine’s largest creditors has agreed to take a small loss on their bonds to speed up the debt-restructuring process, according to two people close to the negotiations.

The proposal sent this week to Ukraine’s government included for the first time a so-called haircut, or a reduction in the face value of the bonds, these people said.

The proposal potentially marks a breakthrough in the monthslong negotiations between the conflict-torn country and its bondholders over a potential restructuring of about $19 billion in debt.

Earlier this year, Ukraine, advised by Lazard, had asked investors to take a 40% haircut on their holdings. But the committee of four investors holding about $8.9 billion of the bonds had steadfastly refused any deal that included a reduction in the face value of the debt.

U.S. Names New Sanctions Targets in ‘Maintenance’ Move

By Samuel Rubenfeld

The U.S. on Thursday added a slew of names to its sanctions blacklists while stressing that the moves were merely an act of “maintenance.”

Senior administration officials told reporters that the round of sanctions, which targeted individuals and entities involved in evading sanctions related to Russia and Ukraine, was a measure to maintain the strength of U.S. sanctions, align them with international partners and to help companies with sanctions compliance.

“This is not intended to be an escalation or a de-escalation of sanctions,” said one senior administration official.

The action, taken by Treasury’s Office of Foreign Assets Control, targeted a total of 26 people and entities, officials said, using authorities derived from four executive orders. Among the targets were four former officials from the regime of ousted president Viktor Yanukovych, five Crimean port operators and 15 people and entities who helped Russia evade sanctions, Treasury said. OFAC also identified several subsidiaries owned 50% or more by Vnesheconombank and Rosneft, all of which were already under sanctions.

Administration officials talking to reporters stressed that the sanctions aren’t meant to escalate the conflict in Ukraine with Russia, nor is it a response to an escalation by Russia.

“It is to maintain the sanctions at a current level of strength by updating them,” said one official, who also said “maintaining sanctions is a constant process.”

In addition, OFAC issued an advisory highlighting methods of evading U.S. sanctions on Crimea, among which were omitting or obfuscating references to Crimea (and locations within Crimea) in documents relating to financial transactions and international trade.

Americans “should be aware of these practices in order to implement appropriate controls, commensurate with their OFAC sanctions risk profile, to ensure compliance with their OFAC obligations,” the advisory said.

Write to Samuel Rubenfeld at Samuel.Rubenfeld@wsj.com. Follow him on Twitter at @srubenfeld.

Some Bond Investors Say Ukraine a Good Bet

Even as Ukraine remains mired in negotiations with creditors over a potential restructuring of its debt, a few hardy investors have recently bet on the conflict-torn country’s bonds.

Pioneer Investments, which oversees $244 billion in assets, now holds about $75 million of Ukraine debt after buying more bonds last week.

Yerlan Syzdykov, head of emerging markets at Pioneer Investments in London, said his firm expects a “relatively peaceful resolution” to Ukraine’s negotiations with its creditors that should see the price of the country’s debt rise.

Wilmington, Delaware-based DuPont Capital Management has also built up a stake of $80 million in Ukrainian bonds in recent months, which represent 8% of its $1 billion emerging-market portfolio.

Ukraine, which has about $19 billion of sovereign debt outstanding, has been in monthslong discussions with bondholders over a potential restructuring. A committee of four investors that own about $8.9 billion of the bonds, led by Franklin Templeton Investments and advised by Blackstone, has proposed a restructuring that would avoid a reduction in the face value of the bonds. But Ukraine, which is being advised by Lazard, has said it wants investors to take a 40% haircut on their holdings.

Though the negotiations have dragged on, there has been renewed optimism of a deal recently. And last week, Ukraine generated more positive sentiment when it met the deadline for a key $120 million coupon payment on its two-year bonds. The country’s two-year bonds now trade around 56 cents to the dollar compared with a low of 38 cents in March.

Pioneer’s Mr. Syzdykov said it was a positive sign that Ukraine “has not triggered its ’nuclear option,’” referring to the possibility that the country might not have make last week’s payment.

Still, with another key bond payment due in September—for $500 million—some investors say it is still too early to buy in.

Alexander Moseley, a portfolio manager at Schroders PLC, said he has bought Ukrainian bonds in the past, but he says the outcome of the negotiations is still too unclear to buy in now.

“Fundamentally nothing has changed. We still see it as expensive,” said Viktor Szabo, emerging market portfolio manager at Aberdeen Asset Management, which oversees £307.3 billion in assets.

Richard House, head of emerging market debt at Standard Life Investments, said he expects negotiations will end with investors taking a bigger haircut on their bonds than the current market price of Ukraine’s debt indicates.

The Ukrainian government “has the incentive to go for as large as possible a haircut. We think the market is mispricing,” said Mr. House, whose firm oversees £246 billion in assets.

Ukraine Makes Key Interest Payment on Bonds

By Chiara Albanese

LONDON—Ukraine made a key interest payment on its bonds, the finance ministry said Friday, following progress in debt-restructuring talks between the country and its creditors.

The conflict-torn country and a committee of four investors holding about $9 billion of its bonds have been in months of tense discussions to restructure $19 billion of the country’s debt. They issued a joint statement last week saying progress had been made, an optimistic message ahead of Friday’s deadline for a $120 million coupon payment on Ukraine’s two-year bonds.

Also last week, Ukraine was allocated the proceeds of a bond sale by the European Union, which has pledged to lend the country a total of €1.8 billion ($1.97 billion). The International Monetary Fund agreed in March to a $17.5 billion bailout for Ukraine.

Prices of the country’s two-year bonds increased slightly after Friday’s payment announcement. The bonds were recently trading at around 56 cents to the dollar, compared with 55 cents Thursday. They were trading as low as 38 cents in March, and rallied last week after signs of progress in the talks.

Ukrainian officials have demanded a 40% principal reduction of the country’s debt and had threatened to stop making repayments. The creditor group has said they won’t accept any “haircut” to the amount they are owed. The finance ministry is being advised by Lazard, while Blackstone Group is advising the creditor group.

‘The Tribe’ Review: Dark Existence in a Silent World

By Joe Morgenstern

There’s always a special pleasure in coming across a debut feature of great originality. In the case of Myroslav Slaboshpytskiy’s “The Tribe,” the pleasure is so special—so inextricably intertwined with pain and horror—that any expectations of conventional enjoyment must be checked at the door. Nevertheless, the film stands as a singular achievement. The setting is a decrepit Ukrainian high school for the deaf, and all of the dialogue is in sign language, without subtitles. In essence it’s a silent film, a shattering vision, in stark black-and-white, of physical violence and spiritual solitude dramatized—and performed by deaf actors—at an almost unbearable level of intensity.

Another expectation to be checked at the door is watching deaf students strive for an education. Not in this school, a graffiti-spattered stand-in for hell where the strong terrorize the weak, boys work predatory scams on commuter trains when they aren’t in class, girls are pimped out to drivers at a local truck stop, and sexual encounters that may or may not contain trace elements of love play out at exhausting length on blankets on a boiler-room floor. “The Tribe” is one of the most disturbing films I’ve ever seen. It may also be among the most memorable—not only for its pitch-black view of human nature, but for the devilishly instructive way in which it turns the tables on us. As we watch in anxious confusion, it’s as if we are profoundly deaf, trying to understand what’s going on and striving to break out of isolation.

In Jacques Audiard’s distinctive French-language drama, Emmanuelle Devos is Carla, a hearing-impaired secretary in a real-estate development office who has toiled too long and hard, with too little recognition. This drab, sadly needy mouse comes remarkably to life once she hires a sleazily sexy ex-con named Paul (Vincent Cassel) to be her assistant. She wants revenge against her employers; he knows how to take it on her behalf. He wants to pull off an improbable heist; she has the lip-reading skills to help make it happen.

Corruption Currents: Navy Censures Admirals Over Bribery

By Samuel Rubenfeld

A daily roundup of corruption news from across the Web. We also provide a daily roundup of important risk & compliance stories via our daily newsletter, The Morning Risk Report, which readers can sign up for here. Follow us on Twitter at @WSJRisk.

Bribery:

The U.S. Navy censured three admirals in connection with a bribery scandal involving a Singaporean company that held more than $200 million in contracts. (Reuters)

Chinese authorities will prosecute a former top graft buster in Guangdong Province for corrupt practices, including bribery and interference in corruption investigations, the government said. (Reuters)

A Turkish politician accused an Iranian businessman of handing out $2.2 billion in bribes as part of the country’s biggest corruption scandal. The businessman, behind bars, didn’t appear to be contacted. (Today’s Zaman)

Money Laundering:

A Global Witness report into the ownership of a swath of London property led to renewed calls in the U.K. to force companies behind property deals to disclose their owners. (Global Witness)

PEPWatch: The daughter of a former Nigerian president was called in for questioning over a fraud case; she didn’t appear to be contacted. (Sahara Reporters)

Sanctions:

Iran is eying $185 billion in oil and gas projects after sanctions are lifted. Much of its freed assets will go toward investments. Analysis of that projected money flow is here. (Reuters, WSJ, Sanction Law)

The Iran deal may eventually help Iranian-Americans with banking issues, but not any time soon. (Reuters)

General Anti-Corruption:

Corruption claims, including the Vyapam scandal, are crippling the Indian premier’s reform agenda. (Nikkei, Nikkei, Reuters)

Europe’s anti-corruption watchdogs praised Ukraine but said more needs to be done. (Kyiv Post)

Hungary’s tax chief, who was barred from the U.S. due to graft allegations, has resigned. European experts told the country to tighten its laws. (AP, AP)

The International Chamber of Commerce released an anti-corruption guide.

A Bolivian judge ordered the president of the country’s soccer federation jailed on charges he diverted funds from a charity match meant for a dead fan. South Korean tycoon Chung Mong-joon said FIFA still hasn’t come to its senses, though the U.N. sports adviser believes Sepp Blatter isn’t corrupt. (AP, Reuters, Al Jazeera)

Corruption Currents: New York City Removes Cloak of Real-Estate Secrecy

By Samuel Rubenfeld

A daily roundup of corruption news from across the Web. We also provide a daily roundup of important risk & compliance stories via our daily newsletter, The Morning Risk Report, which readers can sign up for here. Follow us on Twitter at @WSJRisk.

Bribery:

FIFA President Sepp Blatter faces months of troubles before his departure in February 2016. He still wields considerable power as the struggle to pass reforms continues. (Reuters, NY Times, AFP)

Former FIFA vice president Jeffrey Webb gave up 11 luxury watches, along with his wife’s wedding ring, three opulent cars and 10 properties, to secure the $10 million bond that provided his release from custody. Mr. Webb, and other indicted officials, have property that could be seized. (AP, NY Daily News, NY Times)

A friendly match between Brazil and Argentina in the U.S. was canceled because of the scandal. U.K. parliamentarians say they’ll force FIFA to change. (AP, Daily Telegraph)

IMF Warns Proposed Legislation in Ukraine Threatens Reforms

By Laura Mills

KIEV, Ukraine—The International Monetary Fund warned Sunday that recently proposed legislation in Ukraine threatens to undermine reforms critical to the success of a $40 billion bailout package for the country.

Poul Thomsen, director of the IMF’s European department, said in a statement that seven pieces of legislation up for review in Ukraine’s parliament next week could roll back important reforms on pensions and energy tariffs that Ukrainian lawmakers passed earlier this year.

The fund also condemned a separate law passed by parliament earlier this month that would allow Ukrainians to repay foreign currency loans at a more favorable exchange rate, a move some experts have said could collapse the country’s banking system. President Petro Poroshenko has signaled he will veto the foreign-exchange bill.

The legislative proposals that have prompted censure from the IMF show how lawmakers could easily roll back unpopular reforms in the interest of short-term relief for a beleaguered public, jeopardizing Ukraine’s already shaky economic recovery plan.

A spokesman for the president confirmed that he was prepared to veto the law.

So far, Ukraine has delivered on a number of key reforms demanded by the IMF. In April, gas prices to households nearly tripled and electricity costs rose by an average of 50%, as the country complied with the fund’s demand to end generous energy subsidies. Lawmakers passed pension cuts and tax increases in March, too. Ukraine has received $5 billion of a $17.5 billion pledge from the fund.

But international experts have rushed to condemn recent moves by the parliament, particularly the controversial law passed on July 2 regarding foreign currency loans. The law would allow borrowers to repay loans at an exchange rate of 5.05 hryvnia to the dollar, rather than the current exchange rate of 21.9 hryvnia to the dollar. The National Bank warned that the law would push the banking system toward collapse by draining it of 100 billion hryvnia ($4.6 billion).

The bill was passed with 229 votes, three more than necessary. While the president condemned the law as the work of “populist politicians,” some of his prominent allies voted in favor, including parliament speaker Volodymyr Groisman. Mr. Groisman later said in a Ukrainian television interview that he had voted in favor because he hadn’t had time to read the latest draft of the bill.

On Sunday, the IMF warned that the foreign-currency law, as well as the seven proposed bills, threaten to derail progress made earlier this year. The fund said that if implemented, they could reduce Ukraine’s gross domestic product by 2% in the remainder of 2015 and 3.5% in 2016.

“Reversing economic reforms for the sake of short-term gains has been detrimental to Ukraine’s economy in the past,” Mr. Thomsen said. “Ukraine needs to stay on the course of reforms, economic modernization and responsible macroeconomic policies.”

The seven laws criticized by the IMF were written or co-written by the Fatherland party, a member of the ruling coalition led by former Prime Minister Yulia Tymoshenko. They included wage indexation, the elimination of taxes for pensioners who are still working and a reduction on royalties for local energy production companies.

Corrections & Amplifications:

The Fatherland party in Ukraine’s parliament is a member of the ruling coalition. An earlier version of this article incorrectly said Fatherland is an opposition party. In some cases, Fatherland partnered with other political parties to write seven Ukrainian parliamentary bills criticized by the International Monetary Fund. The article said Fatherland wrote all the bills. (7/15/2015)

Ukraine Gears Up for Debt Talks as Default Deadline Looms

Ukrainian Finance Minister Natalie Jaresko will meet with the country’s bondholders on Wednesday in a down-to-the-wire effort to reach a restructuring deal before a possible default.

With its economy battered by a conflict with Russia-backed separatists in the east, Ukraine is inching closer to a July 24 deadline for $120 million in coupon payments. While both Kiev and its creditors say they hold out hope for a deal, neither side has budged in months of bitter talks.

Ukrainian officials say that skipping the payment would be a “technical default” and just a minor bump in the road for an already hard-hit economy. But the creditor committee, made up of four members who hold about $9 billion of Ukrainian debt, has suggested that any failure to repay counts as a default and stands to jeopardize Ukraine’s recovery plans.

“A technical default is not the end of the country in any way—it’s the start of restructuring,” Ukraine Economy Minister Aivaras Abromavicius said in an interview at a Ukraine business conference in Washington. “It cuts us out of the public markets for a certain period of time, but we knew that from the beginning.”

Another Ukrainian official familiar with the negotiations said the country may still avoid a default ahead of the July 24 deadline if the two sides set aside their differences in this week’s talks. “If we’re making serious progress, then I think we can make that payment,” the official said.

U.S., Ukraine Weigh Expansion of American Training Program

LVIV, Ukraine—U.S. and Ukrainian officials are making plans to expand the training of Ukrainian military forces at a training base in the western part of the country, officials said Wednesday.

The U.S. is currently training Ukrainian national guardsmen at the training site, about 28 miles from Lviv, Ukraine. Members of the National Guard, part of the Ministry of Interior, aren’t front-line troops but are in charge of defending supply lines and operating check points.

Ukrainian military officials said Wednesday they want to bring their conventional army troops and special-operations forces to the training center to run through the course taught by U.S. soldiers from the 173rd Airborne Brigade, based in Italy.

The Ukrainians have selected mechanized and airborne units that would be part of an expanded training program.

U.S. officials have also begun planning for a potential expansion of the training, lining up funding and beginning planning for the expansion. But officials said a final decision on increasing the training is up to the White House. White House officials didn’t immediately respond to a request for comment.

On a visit to the training base, Gen. Ray Odierno, the Army chief of staff, said it was clear the Ukrainian government wanted the U.S. to expand its training, but declined to say whether he would support stepped-up training.

Still, Gen. Odierno said he backed Ukrainian plans to expand the capability of the training base to handle larger units, saying the center is critical for Kiev to prepare and sustain their forces fighting Russia-backed separatists.

Soldiers of the 173rd said the National Guard has fought high intensity engagements against well-armed forces, including sustained barrages of artillery fire by Russian forces, a particular kind of attack that U.S. forces haven’t experienced for decades.

Gen. Odierno said that wartime experience meant U.S. forces are learning important lessons from Ukrainians even as they teach Kiev’s forces about basic combat.

A Wall Street Journal reporter accompanied Gen. Odierno on his visit to the base. As he toured the training ground, Gen. Odierno told the 173rd soldiers that it was important to learn from Ukrainians how the Russians and separatists were fighting.

“We haven’t faced something like this ourselves for a while,” Gen. Odierno said.

The U.S. also is teaching the Ukrainians how to disarm roadside bombs. The training is based on the kinds of mines being used in eastern Ukraine and on tactics that U.S. soldiers saw in Iraq and Afghanistan and believe are likely to migrate to Ukraine.

Soldiers from the 173rd also have brought lessons learned in Afghanistan and Iraq on battlefield medicine. At the training center, U.S. soldiers played the part of wounded civilians, complete with fake blood, dummy severed limbs and simulated chest wounds.

Staff Sgt. Brian Kociuruba, a battalion senior medic with the 173rd, said he was teaching the Ukrainians to work with limited supplies, emphasizing that all soldiers need to know how to administer first aid. He said that in recent weeks the units he has trained have quickly improved as medics.

“They have come a long way, I would fight with any of them, I would let any of them treat me,” Sgt. Kociuruba said.

Gen. Odierno asked one Ukrainian medic if he was going to be a doctor one day.

RT @ChristopherJM: A piece of #MH17 that reads "Boeing" still rests in the field where the cockpit fell in Rozsypne, eastern #Ukraine. http…

Greece’s Lesson for Ukraine: More Populism, Please

By Stephen Sestanovich

This is an acute problem in Ukraine. Whatever his reformist tendencies, President Petro Poroshenko is an “oligarch”—one of the super-rich businessmen who thrived despite the nation’s distress. Far more than Mr. Poroshenko himself (whose money comes from chocolate), most oligarchs built their empires by manipulating the government’s regulatory agencies (especially energy policy), by buying judges and prosecutors, by controlling the customs service, and so forth.

Ukrainians say that such “corruption” is their main national problem. They’re right, but they aren’t convinced that the government is committed to the “de-oligarchization” that is its only cure. Ukraine’s friends abroad need to embrace this goal more fully. A “populism” that attacks oligarchic power is the only kind of economic program that can work. It’s the only kind that can keep the country united in hard times. And it’s the only way to keep Ukraine from becoming Greece.

Stephen Sestanovich, a professor at Columbia University and senior fellow at the Council on Foreign Relations, is the author of “Maximalist: America in the World From Truman to Obama.” He is on Twitter: @ssestanovich.

Ukraine Suspends Purchases of Russian Natural Gas

By Naftali Bendavid

BRUSSELS—Insufficient “political will” was to blame for a breakdown in talks that would have allowed Ukraine to buy natural gas from Russia for the rest of the year, Maros Sefcovic, the European Union’s energy chief, said Wednesday.

“We really did our utmost to get the parties together,” Mr. Sefcovic said. “I was coming to Vienna with good answers to all the questions which were put on the table. But what we lacked in the end was enough of the political will.”

Saying a final negotiating session on Tuesday had been “difficult,” Mr. Sefcovic added, “I would not hide that we hoped that we would come back with better news.” The two sides plan to renew talks later this year.

The European Commission, the EU’s executive body, mediated the talks in Vienna between Ukraine’s state oil and gas company, OAO Naftogaz, and Russian gas giant OAO Gazprom.

Mr. Sefcovic issued a statement late Tuesday saying the two sides were “still far apart” on a deal. Naftogaz said Wednesday it was suspending natural gas purchases from Gazprom due to the inability to reach an accord.

Officials stressed that Ukraine and the EU aren’t in danger of running out of gas.

The EU gets about one-third of its gas from Russia, and about half of that is transported through Ukraine. The conflict in eastern Ukraine, and the broader standoff between Moscow and Kiev, had put those deliveries in doubt.

Naftogaz said it would allow deliveries to Gazprom clients in the EU and Turkey. And Mr. Sefcovic said preparations—especially reverse-flow arrangements with Hungary, Slovakia and Poland—ensured that gas supplies in Ukraine won’t be “endangered.”

Ukraine needs an additional 7 billion cubic meters of gas for the winter, and the reverse flows can supply about 1.8 BCM a month. “We have the capacity, we have the time, and we have the gas,” Mr. Sefcovic said.

The apparent cause of the talks’ breakdown was price. Russia put forward a rate of $247.18 per thousand cubic meters, which it said was in line with regional prices, but Ukraine found it too high.

But Mr. Sefcovic suggested that in the end the differences were political rather than technical. Russia and Ukraine are engaged in a bitter military and political confrontation, as Kiev clings to a shaky cease-fire with Russian-backed separatists in eastern Ukraine.

“I think you see my frustration. I am not hiding it,” Mr. Sefcovic said. “The lack of will was clearly demonstrated on both sides.”

Experts from both sides hope to meet again in late August, and political leaders aim to reconvene in September.

Naftogaz said it is prepared to renew gas purchases from Gazprom once “a comprehensive temporary agreement” had been reached, preferably one that lasts until at least March 31.

Russia, Ukraine ‘Still Far Apart’ on Gas Deal

BRUSSELS—Russia and Ukraine “are still far apart” on a deal to ensure stable natural-gas deliveries to Ukraine and the European Union over the winter, the EU’s energy czar said Tuesday.

The statement from the EU’s vice president for the energy union, Maros Sefcovic, came after the energy ministers from both sides met in Vienna, along with the chief executives of their gas companies, Russia’s OAO Gazprom and Ukraine’s OAO Naftogaz.

The EU gets about one-third of its gas from Russia and about half of that is transported through Ukraine. But the conflict in eastern Ukraine and the broader standoff between Moscow and Kiev has put these deliveries in doubt.

“As the meeting has shown today, the parties are still far apart,” Mr. Sefcovic said. “We have agreed that the [European] Commission will put forward ideas to prepare next steps so that the next consultation could take place.”